Sorsogon Integrated Area Development Project (Loan 915-PHI[SF])

7/31/2019 Sorsogon Integrated Area Development Project (Loan 915-PHI[SF])

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ASIAN DEVELOPMENT BANK PPA:PHI 16070

PROJECT PERFORMANCE AUDIT REPORT

ON THE

SORSOGON INTEGRATED AREADEVELOPMENT PROJECT

(Loan 915-PHI[SF])

IN THE

REPUBLIC OF THE PHILIPPINES

December 2000


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CURRENCY EQUIVALENTSCurrency Unit Peso (P)

Sorsogon Integrated Area Development Project (Loan 915-PHI[SF])

At Appraisal

(30 September 1988)

At Project Completion

(1 March 1998)

At Operations Evaluation

(31 May 2000)P1.00 = $0.047 P1.00 = $0.0249 P1.00 = $0.0233$1.00 = P21.34 $1.00 = P40.01 $1.00 = P42.976

ABBREVIATIONS

ADB Asian Development BankADTA advisory technical assistanceBME benefit monitoring and evaluationCIS communal irrigation systemDPWH Department of Public Works and Highways

EA executing agenciesEIRR Economic Internal rate of returnFGD focus group discussionIA irrigators associationLGU local government unitMDF Municipal Development FundNGO nongovernment organizationNIA National Irrigation AdministrationO&M operation and maintenanceOEM Operations Evaluation MissionPCR project completion reportPMU project management unit

PPAR project performance audit reportPPTA project preparatory technical assistanceRRP report and recommendations to the PresidentRWSA Rural Water and Sanitation AssociationSAC Social Action CenterSSTA small-scale technical assistanceTA technical assistanceVOC vehicle operating cost

NOTES

(i) The fiscal year (FY) of the Government and the Executing Agencies ends on 31 March.(ii) In this report, $ refers to US dollars.

Operations Evaluation Office, PE-558


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CONTENTS

Page

BASIC DATA iiEXECUTIVE SUMMARY iii

MAP v

I. BACKGROUND 3A. Rationale 3B. Formulation 3C. Purpose and Outputs 3D. Cost, Financing, and Executing Arrangements 4E. Completion and Self-Evaluation 4F. Operations Evaluation 4

II. PLANNING AND IMPLEMENTATION PERFORMANCE 5A. Formulation and Design 5

B. Achievement of Outputs 5C. Cost and Scheduling 6D. Procurement and Construction 6E. Organization and Management 7

III. ACHIEVEMENT OF PROJECT PURPOSE 8A. Operational Performance 8B. Economic Reevaluation 13C. Sustainability 14

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS 15A. Socioeconomic Impact 15

B. Environmental Impact 16C. Impact on Institutions and Policy 16

V. OVERALL ASSESSMENT 16A. Relevance 16B. Efficacy 17C. Efficiency 17D. Sustainability 17E. Institutional Development and Other Impacts 17F. Overall Project Rating 17G. Assessment of ADB and Borrower Performance 18

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 18A. Key Issues for the Future 18B. Lessons Identified 20C. Follow-Up Actions 20

APPENDIXES 21


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BASIC DATASorsogon Integrated Area Development (Loan 915-PHI[SF])

Project PreparationTA No.

475

9291054

TA NameSorsogon Integrated Area Development

Sorsogon Integrated Area Development (Update)Community Mobilization and Development

Amount ($)350,000

75,000100,000

Approval Date19 Aug 1982

2 Dec 19873 Nov 1988

Key Project Data ($ million)As Per ADB

Loan Documents ActualTotal Project Cost 30.1 29.9Foreign Exchange Cost 12.4 12.6Local Currency Cost 17.7 17.3

ADB Loan Amount/Utilization 24.1 22.9Foreign Exchange Cost 12.4 12.6Local Currency Cost 11.7 10.3

Key Dates Expected ActualAppraisal 521 Jul 1988Loan Negotiations 56 Oct 1988Board Approval 3 Nov 1988Loan Agreement 27 Dec 1988Loan Effectiveness 27 Mar 1989 18 Aug 1989First Disbursement 12 Dec 1989Loan Closing 31 Aug 1995 15 Apr 1997Project Completion Feb 1995 Dec 1997Months (effectiveness to completion) 71 100

Key Performance Indicators (%)Appraisal PCR PPAR

Economic Internal Rate of Return 17.6 11.5 5.2

Financial Internal Rate of Return

Borrower Government of the Republic of the Philippines

Executing Agencies Provincial Government of SorsogonDepartment of Public Works and HighwaysDepartment of HealthNational Irrigation AdministrationDepartment of Agriculture

Mission DataType of Mission No. of Missions No. of Person-DaysFact-Finding 1 72

Appraisal 1 85Project Administration

Inception 1 25Review 9 125Loan Disbursement 1 10Project Completion Review 1 33

Total 12 193Operations Evaluation 1 45

= not calculated.ADB = Asian Development Bank; PCR = project completion report; PPAR = project performance audit report;TA = technical assistance.


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EXECUTIVE SUMMARY

The Project is located in Sorsogon Province, one of the least developed regions in thePhilippines with an incidence of poverty of 78.6 percent at appraisal in 1988. The objective of theProject was to reduce rural poverty by increasing income, generating employment, and improvingliving standards of subsistence farmers and fishing communities in Sorsogon Province. The Project

comprised five components: (i) road improvement and rehabilitation; (ii) communal irrigation systems(CISs) and flood control; (iii) health services through schistosomiasis control and domestic watersupply; (iv) support services for agriculture and fisheries, including abaca rehabilitation, plantnurseries, and artificial reefs; and (v) project management and training. The Project also attached anadvisory technical assistance (ADTA) for Community Mobilization and Development.

The project cost was estimated at $30.1 million at appraisal, financed by a loan of $24.1million from the Asian Development Fund, and the remaining by the Government. The actualproject cost at project completion was $29.9 million. However, as some road works were stillongoing, the Government provided its own funds to continue, and completed the remainingconstruction by 1998. Consequently, the final project costs at the time of the project performanceaudit report (PPAR) were $32.3 million.

By focusing on poverty reduction in a neglected region, the Project was highly relevant tothe strategic objectives of the Government and the Asian Development Bank (ADB). Roaddevelopment improved rural infrastructure and stimulated the local economy. The trickle downimpact of economic growth induced by the Project was effective when the majority of thepopulation was poor; the Project reduced rural poverty by about 15 percent in the project area. Theintegrated interventions through schistosomiasis control, domestic water supply, and mitigation offloods improved health conditions of the poor. However, the subcomponents of abaca and plantnurseries were less relevant as their outputs (free seedlings) contributed little to the Projectsobjective.

The Project accomplished most of the major targets set for the major components, such as

roads, flood control, CISs, and health services. Some minor subcomponents, such as plantnurseries and abaca, did not fulfill their targets (but the shortfall of these targets did not seriouslyaffect the Projects objective because these subcomponents were less relevant).

Project implementation suffered serious delays in the first three years but accelerated laterwhen project staff gained experience. As a result, the Project was completed with a delay of 34months. The project economic internal rate of return (EIRR) of 17.6 percent estimated at appraisalwas reduced to 11.5 percent at the time of the project completion report (PCR), and furtherreduced to 5.2 percent at PPAR. The EIRR at appraisal and PCR overestimated the benefits fromthe agriculture component, and the substantial shortfall in its actual achievements let to the sharplyreduced EIRR.1

The Projects sustainability varies by component. Roads, flood control, and health services,which accounted for over 70 percent of the Projects cost, are likely to be sustainable as they havebeen maintained well by government agencies that have a sufficient amount of regular budget,competent staff, and adequate equipment. The sustainability of the CISs is at risk but can bestrengthened if urgent steps are taken immediately. The sustainability of the plant nurseries andthe abaca laboratory is poor.

1However, the EIRR calculation does not capture the substantial amount of indirect and unquantifiable economicbenefits generated by the road development component, which stimulated the local economy.


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The Project had a significant institutional impact on local governments, which werestrengthened by absorbing most of the project staff that received substantial training and gainedextensive experience under the Project. It is envisaged that these staff will play a valuable role infuture design and implementation of development projects in Sorsogon Province. The Projectsinstitutional impact on beneficiaries is limited by the short implementation period of the ADTA andthe lack of continued institutional support after project completion.

Overall, the Projects development impacts in Sorsogon Province are readily visible. Itimproved rural infrastructure, stimulated business, and promoted economic growth. As 11 out of 16municipalities upgraded their classification levels of economic development, the Province no longerhas any Class VI municipalities (the poorest). The Project achieved its objective and reduced ruralpoverty by about 15 percent in the project area. Based on the above assessments, the Project israted successful. The performance of both ADB and the Government is satisfactory.

Key issues were identified. First, the Project suffered serious delays in its initial years, witha major cause being the lack of readiness of the project offices at the start of projectimplementation. Due to the lack of financing before loan effectiveness, these offices, althoughestablished, were unable to recruit staff, conduct staff training, and prepare workplans. In the

future, project approval should focus on their readiness for implementation. Otherwise, sufficienttime should be provided for the start-up phase of project implementation.

Second, the slow release of project funds was the primary reason for most delays under theProject, caused by (i) the large number of signatures required for processing disbursementvouchers, and (ii) insufficient staff capacity in the agencies involved in approval and release offunds. Future projects should minimize the number of government agencies involved in the fundsflow process; full-time staff should be assigned to speed up paper processing in the agencies thatare needed in this process.

Third, while the Project reduced poverty, about 50-60 percent of people in the project arearemained poor. These were mainly landless and jobless laborers who were in too weak a position

to make use of the physical infrastructure invested under the Project. The impact of the communitydevelopment under the ADTA was minimal due to its short implementation period and the lack ofcontinued institutional support. To maximize the poverty reduction impact, future projects shouldinclude social preparation for the poor before the physical investment. Institutional support for thepoor should be continued after project completion, which could be financed by ADTAs.

Lastly, the sustainability of the CISs is poor, primarily due to farmers lack of willingness topay for operation and maintenance, with an underlying factor being the weak leaders of theirrigators associations and their lack of ownership of the CISs. Demand analysis for futureirrigation projects should be based on farmers willingness to pay, which should be secured bywritten agreements with enforcement measures.

In addition to the above issues, the Project provided lessons relating to the design ofpoverty reduction projects. The approach to reduce poverty through improving infrastructure andpromoting economic growth is effective when the majority of the population is poor. However, asmany landless and jobless poor are less capable to take advantage of the new infrastructure, directinterventions are needed to remove the key constraints that they face. The impact of irrigationprojects on poverty reduction will be limited if the majority of the poor have no access to land, andthe projects will benefit mainly the relatively better-off groups, such as landlords, small landowners,and tenants with regular incomes.


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The OEM inspected project facilities in 20 subproject sites and found that most of the projectfacilities completed were of good quality, especially the roads, flood control structures, and CISs.

C. Cost and Scheduling

12. At appraisal, the project cost was estimated at $30.1 million with a loan amount of $24.1

million. The Project was to be implemented in six years from 1989 to 1995. Actual implementationexperienced serious delays in the initial three years but accelerated in later years. As a result, theloan was extended for one year to 31 August 1996, actually closed on 15 April 1997, and theProject was completed in December 1997. At loan closing, the loan disbursement was SDR16.03million (equivalent to $22.9 million); the unused loan balance of SDR2.64 million (equivalent to$3.61 million) was canceled; the actual project cost was $29.9 million. However, as some roadworks were still ongoing, the Government provided its own funds to continue, and completed theremaining construction by 1998. Consequently, the final project costs at PPAR were $32.3 million(Appendix 1).

13. The OEM identified three factors as the major causes underlying the serious delays in thefirst three years. First, the project design underestimated the time needed for the project start-up

phase. The appraisal mission correctly assured the establishment of project offices before loaneffectiveness including the project management unit (PMU). However, the set-up of the projectoffices did not guarantee normal operations. In fact, until the loan became effective and fundsreleased, it was difficult for the EAs and LGUs to recruit project staff. As a result, the PMUoperated initially with only 10 temporary staff detailed from various provincial offices. It was notuntil one year later (July 1990) that the majority of the 32 PMU staff were working. Due to thepressure to catch up with the elapsed time, the new staff started their jobs without going throughproper training. Their lack of preparedness led to mistakes in submitted budget applications andcontributed to the slow approval and release of project funds.

14. Second, the slow flow of project funds was a primary cause underlying almost all otherdelays. The large number of signatures required for liquidation of funds was a serious problem.7

Although liquidation involved the Provincial Treasury Office, Provincial Accountants Office, andProvincial Auditors Office, no additional staff were assigned to these offices to handle the Project-related papers. Staff in these offices could not give high priority to the Project, which was just anadditional task upon their normal workload. The slow paper processing in these offices contributedto the delays in release of funds.

15. Third, political intervention was a major factor underlying some prolonged delays. Forexample, the prolonged delay in the assignment of the PMU Director directly led to the six-monthdelay in loan effectiveness. The one-year delay in PMU staff recruitment and changes in theirpositions were also affected by politics.

D. Procurement and Construction

16. The procurement of vehicles and large equipment items was through internationalcompetitive bidding or international shopping. Procurement suffered most delays due to the slowrelease of project funds, cumbersome procedures, and a temporary ban on vehicle imports issuedby the Office of the President in 1991. It was reported that some procurement was still beingpursued when the Loan was to be closed in August 1996. Some vehicles were delivered in the lastyear of project implementation, making little contribution to the Projects achievements.

7At the local level, it was reported that about 20 initials and signatures were required for the processing of adisbursement voucher.


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21. The Project provided 18 person-months of international consultant services and 205 person-months of domestic consultant services. The international consultants assisted (i) the PMU in projectmanagement, and (ii) the Provincial Engineers Office in road equipment selection and training. Thedomestic consultants provided a wide range of services to the PMU and EAs, including advice onmanagement systems, procedures, benefit monitoring and evaluation, perennial crop production, aswell as design and construction of artificial reefs, and flood control structures. The OEM confirms the

PCRs assessment that the consultants performance was generally satisfactory, and their hands-ontraining for project staff was effective. However, since project implementation was seriouslydelayed in its initial stages, some consultants spent their time when there were few activities inproject implementation. For example, due to delays in the construction of the artificial reefs, theconsultant assisted in the design of the modules but not in their deployment, which was a moredifficult task.

III. ACHIEVEMENT OF PROJECT PURPOSE

A. Operational Performance

1. Road Improvement and Rehabilitation

22. The aim of this component was to improve and rehabilitate 156 km of roads in five years.The target was revised to 142 km after detailed engineering design. The actual completion was138 km at loan closing when the remaining road works were still ongoing. The Governmentprovided its own funds to continue and completed another 3 km in 1998, making a totalaccomplishment of 141 km. The OEM inspected most of the project roads and found theconstruction quality to be good. Based on interviews with beneficiaries, traffic increasedsignificantly in Sorsogon Province after road rehabilitation. Overall, this component achieved itsobjective of reducing poverty through improving rural infrastructure and promoting the localeconomy. As a result, the LGUs in most municipalities in Sorsogon Province upgraded theirclassification levels of economic development after the Project (Appendix 3).8

2. Irrigation Development and Flood Control

23. Irrigation Development. This component was to improve 15 CISs in five years with aservice area of 2,750 ha, which was revised to 2,547 ha after detailed engineering design. Theactual implementation lasted for seven years and the achievement was 2,049 ha as the Tabon-Tabon scheme, the largest CIS with a service area of 502 ha, was deleted. Construction of theTabon-Tabon CIS encountered serious delays due to internal conflicts among irrigators in thesubproject area. When the conflict was finally resolved in 1995, it was too late to complete thislarge system. Other factors such as slow release of project funds and delays in vehicleprocurement also contributed to delays in the construction of the other CISs. The OEM inspectedthe CIS schemes and found that the construction quality was good.

24. This component also targeted the strengthening of irrigators associations (IAs) in the 14CISs, which were to be turned over to the IAs after the construction. To prepare the IAs to assumetheir mandates, the Project conducted 78 training programs for them, ranging from operation andmaintenance (O&M), financial management, group leadership, and monitoring. In spite of thesubstantial amount of training, few IAs performed satisfactorily. The OEM assessed the 14 IAs andfound that only five of them had strong leadership and active member participation (Appendix 4). Inparticular, water charge collection was very low in most of the IAs, averaging 12 percent (Appendix

8Municipal LGUs in the Philippines are classified into six categories in accordance with their annual revenues fromClass I to Class VI in reverse order, with Class VI being the poorest.


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5).9 Due to insufficient O&M funds, some major canals were heavily silted; some damage from atyphoon in 1998 was still unrepaired at the time of the OEM in May 2000, resulting in water lossesand reduced service area.

25. Farmers lack of capacity to pay was not a major cause of the problem, as the watercharges were a very small portion (averaging less than 5 percent) of the incremental benefits

received by the farmers (Appendix 5). Discussions with farmers found that the major cause of theproblem was farmers lack of willingness to pay, which, in turn, resulted from three factors. First, inthe poorly performing IAs, the members lost confidence in their leaders and did not participate inO&M activities. Second, many IAs did not have effective measures to discipline those who did notpay, which undermined the repayment moral of those who paid. Last, some farmers did not receivewater due to (i) poor O&M of the CISs and the unrepaired damage, which reduced the servicearea; and (ii) El Nio in 1998, which dried up water sources in many CISs. Although El Nio hadgone, the poor O&M and damage remained, forming a vicious cycle of poor irrigation services andpoor payments.

26. The above issue was not anticipated at appraisal. The appraisal report included detailedO&M arrangements, including clear descriptions on the responsibilities of the government agencies

and beneficiary groups involved. However, neither the report and recommendation of the President(RRP) nor the appraisal report specified the O&M funding sources. While consultations withfarmers took place before the CIS investment, farmers willingness to pay was not documented inwritten agreements, nor were effective enforcement measures. In particular, responsibility for therepair of future damage in the CISs was not clearly defined. While the responsibilities of the IAsincluded minor repairs, minor or major repairs were not defined. The OEM found that much ofthe unrepaired damage was medium requiring a budget of about P100,000. Due to frequenttyphoons in Sorsogon Province, such medium damage could occur in about five out of the 14CISs in one year. NIA said that it did not have the budget to meet such frequent requests for publicassistance; farmers said that repairing such damage was beyond their means. As farmers werewaiting for help and NIA did not have the funds to do so, the CISs deteriorated and more areaslacked irrigation services.

27. A more fundamental factor underlying poor O&M of the CISs was the weak leadership ofthe IAs. The OEM observed that under the same climate conditions, five CISs were maintainedwell, largely due to the strong leaders of the IAs, who stimulated the active participation of theirmembers in O&M activities. In contrast, the poor O&M of a CIS always related to the weak leadersof the IA, who developed an attitude of relying on government assistance, or waiting for the nextelection to request help from politicians.10 The OEM also observed that in some CISs, landlords(some of them were leaders of the IAs) benefited from the improved irrigation systems but did notshare in paying the water charges, which were paid entirely by the tenants.

28. Poor O&M of the CISs was also caused by a weak sense of ownership on the part of theLGUs. Since the LGUs were not involved in CIS design and implementation, they considered the

Project as belonging to the national government and did not commit themselves to the sustainingthe CISs. The LGUs also have too few extension workers, largely due to budgetary constraints.11Since agricultural extension was devolved to LGUs in 1992, NIA has considered the CISs as

9 In some CISs, members of the IAs contributed labor to compensate for the insufficient collection of water charges. Ingeneral, however, O&M of the CISs suffered from insufficient funding because of the poor collection of water charges.

10In one case, the OEM found that the IA Chairman was a landlord who did not even live in the village. In this case, fewIA members actively participated in O&M activities or paid water charges.

11The Provincial Irrigation Office had only two irrigation technicians who had to take care of 55 IAs throughout theprovince. Such a ratio was substantially higher than the optimal ratio of 5-8 IAs per extension worker.


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LGUs responsibility and did not provide sufficient extension services for the IAs after projectcompletion.

29. Flood Control. This subcomponent aimed at alleviating the flood problem in the Irosin-Juban Valley through widening the Cadacan River at Sankayon, Buraburan, and Juban. While thisobjective was achieved, its accomplishment was delayed from the four years anticipated at

appraisal to seven years, primarily due to the slow release of project funds, which led to delays indetailed engineering design and construction. At project completion, the flood discharge capacity ofthree subsections along the Sankayon-Juban section of the Cadacan River was improved, and twounits of rainfall-runoff gauges were installed as planned. The OEMs field inspection found that theflood control facilities were of good quality.

3. Health Services

30. Schistosomiasis Control. To break the life cycle of schistosomiasis, a number ofmeasures were implemented in 1991-1992, including the repair of schistosomiasis control channeldrains, installation of water-sealed toilet bowls, construction of concrete footbridges, and sprayingof molluscicide in snail-positive areas. Delay under this subcomponent was limited primarily due to

its small size: no consultant was recruited or large items procured. As targeted, schistosomiasisprevalence dropped from 6.8 percent in 1990 to 2.4 percent in 1997, and has remained at 2-3percent since project completion. According to DOH, a prevalence rate of 5 percent or below isconsidered not to be a public health problem.

31. Domestic Water Supply. This subcomponent was to (i) rehabilitate the level III watersupply system in the municipality of Irosin; (ii) construct a level III system in the municipality ofJuban; and (iii) develop 15 level II and 52 level I systems in Irosin and Juban. The first target wasachieved in spite of delays due to the slow release of project funds. As envisaged at appraisal, aRural Water and Sanitation Association (RWSA) was established to take care of the O&M of thewater supply system. However, the RWSA was unable to collect enough user fees to financesystem O&M, which was taken over by the Irosin municipal government after two years of system

operations. As the annual collection of water tariffs (about P700,000) was insufficient to cover O&Mcosts (about P1.2 million), the Irosin municipal government subsidized the water consumers. TheRRP did not anticipate this issue and overestimated the RWSAs capacity to finance and managethe water system.

32. The construction of the level III system in Juban encountered serious problems relating toterritorial jurisdiction between the municipalities of Juban and Casiguran. The latter demandedfinancial compensation for the former using the water resources in Casiguran.12 As the Project didnot provide a budget for water purchase, ADB approved the shift of the water resources fromCasiguran to Juban, which was more costly and less reliable. When the above issue was finallyresolved after two years, many of the constructed pipelines had been stolen during the long periodof interruption. When the system was finally completed in 1997, farmers in the nearby area illegally

tapped water for irrigation, resulting in about 45 percent water loss and damage to the pipelines.Worst of all, after operating for about two years, the water collection box collapsed due to soilerosion caused by heavy rains. It was concluded that it was better to build a larger collection boxincluding measures to control the soil erosion than to repair the old box. However, since there wereno funds either to rehabilitate the old box or build a new one, the level III system in Juban

12This issue was not foreseen at appraisal. The mayors of the two municipalities reached a oral agreement on the use ofthe water resources before the investment. The territorial issue emerged when a large portion of the investment hadbeen made.


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remained out of operation. The RRP did not foresee these issues, and the Project did not haveextra funds to be reallocated to the water supply component.

33. The insufficient funds also led to the cancellation of all 15 level II systems and the reductionof the number of level I units from 52 to 23. The OEM found that 22 of the 23 level I units hadstopped operating due to lack of sense of ownership and a maintenance system. Only one level I

unit was still working at the time of the OEM inspection, and this was managed by one family thatcollected a monthly fee of P5 from the 20 users around the unit. If the successful experiences ofthis unit had been studied and replicated during project implementation, the other level I unitsmight have continued operating.

4. Agriculture and Fisheries Support

34. Plant Nurseries.This subcomponent was intended to upgrade one provincial nursery andestablish 50 communal nurseries. The latter target was revised to 16 municipal nurseries and 13communal nurseries after the devolution of extension services to LGUs in 1992. The target ofproducing and distributing 1 million planting materials was underfulfilled: the Project produced413,780 seedlings and distributed 389,750, largely due to the slow release of project funds and

problems relating to the management of the nurseries, as discussed below.

35. It was envisaged at appraisal that the communal nurseries would be managed bycommunity groups. While the NGO engaged under the ADTA organized 22 farmer groups, none ofthem sustained operations, and none of the 13 communal nurseries continued their operations(para. 43). Of the 16 municipal nurseries, only 11 were still operating at the time of the OEMinspection, as they received insufficient financing from municipal LGUs. The cost recovery plan forthe nurseries (i.e., selling seedlings) was not realized, since other government programs weredistributing seedlings free of charge. As a result, all planting materials under the Project weredistributed free.

36. The provincial nursery was upgraded as planned; its operations were financed by the

provincial government. Due to insufficient funds, however, the nursery reduced its scale ofoperations, resulting in underutilization of the capacity upgraded under the Project. Similarly, mostof the municipal nurseries suffered from insufficient funds and could not maintain normaloperations. It would now be better to allow the nurseries to sell their seedlings at a cost-recoveryprice to finance operations. However, government officials strongly believe that government shouldprovide seedlings to farmers free because farmers are poor.13

37. Abaca Rehabilitation.This subcomponent targeted the rehabilitation of 2,000 ha of abacaplantations that were damaged by a typhoon in 1987. The target was to be achieved through theprovision of abaca seedlings by establishing an abaca tissue culture laboratory. At projectcompletion, only 922 ha had been rehabilitated, primarily due to the slow release of project fundsthat resulted in a shortage of equipment and supplies for the laboratory. While the laboratory

continued its operations after project completion, its production and distribution fell sharply,primarily due to insufficient funds and their delayed release, which caused interruptions in thesupply of chemicals and resulted in a large loss of tissue cultures. To operate within its budget, thelaboratory reduced the scale of its operations, leading to underutilization of the facilities investedunder the Project. It would be financially better for the laboratory to divert its operations (such asexpanding to banana culture) via contracts with other government agencies or private entities soas to self-finance its operations.

13In fact, many of the recipients of the free seedlings were not poor; one of them received seedlings worth P10,000.


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38. In spite of the poor achievement under this subcomponent, the PCR expected thatrehabilitation of the remaining abaca plantations would be completed by 2002. The OEM foundsuch an expectation highly unlikely. Since 1992, the spread of bunchy top disease has wiped outabout 40 percent of the 18,000 ha of abaca plantations in Sorsogon Province. Of the remaining11,000 ha, only 2,000 ha have not been affected; 4,000 ha have been controlled; and another5,000 ha of the affected area have not been controlled due to insufficient funds.

39. Artificial Reefs.This subcomponent was to enhance fisheries resources and increase theincome of poor fisherfolk through the establishment of 3,000 artificial reef modules at four sites infour municipalities. The actual achievement was only 2,445 modules due to delays in release offunds. As targeted at appraisal, four fisherfolk associations were organized. A municipal ordinancewas issued in each of the four municipalities to declare the artificial reef sites intensive marinemanagement areas for the exclusive use of, and management by, the fisherfolk associations.

40. While fish biomass increased substantially around the artificial reefs as reported by divers,an unanticipated outcome was observed. The greater number of fish at the four sites attractedcommercial vessels to the artificial reefs (within municipal waters), which fished using powerfullights. This was especially so in Bulan Municipality, although commercial fishing in municipal

waters and the use of powerful lights were prohibited by law, enforcement of the law was weak.The fisherfolk associations were unable to control the commercial vessels encroachment due to alack of speedboats, equipment, and strong support from politicians.14

5. Project Management and Training

41. This component financed the PMUs operations as well as training for project staff andbeneficiaries. These tasks were finished by project completion, including a benefit monitoring andevaluation (BME) system that conducted an extensive socioeconomic survey to collect benchmarkinformation. Due to delays in the release of project funds, recruitment of project staff, andprocurement of vehicles, however, the benchmark survey did not start until the fourth year ofproject implementation and was completed in the fifth year. There was no report on the use of the

survey results, and BMEs contribution to project monitoring was limited. The Projects quarterlyprogress reports were prepared by each EA and consolidated by the PMU without activeparticipation of the BME staff. The BME would have contributed more to project monitoring if itsdesign had focused on a few key indicators instead of a comprehensive survey that was costly andtime-consuming.

42. A total of 47 training programs for project staff and 59 for project beneficiaries wereorganized, with 280 staff and 3,350 beneficiaries trained. It was reported that the training on projectstaff was effective, especially that on project planning and management, financial budgetpreparation, and implementation monitoring. The substantial amount of training on projectbeneficiaries also contributed to enhancing their capacity. By tapping technical staff in thegovernment agencies as trainers in the beneficiary training, the Project reduced training costs. The

impact of the training on beneficiaries, however, was not impressive (para. 24).

14While destructive fishing such as dynamite and cyanide fishing were substantially reduced, this new form of illegalfishing by commercial vessels in municipal waters was not effectively controlled except in some municipalities wherethe mayors had a strong commitment to controlling illegal fishing and used coast guards to enforce the law. In thesemunicipalities, strengthening the coast guards through the provision of speedboats and communications equipmentmight have seen the fisherfolk associations, instead of the commercial operators, benefit from the artificial reefs.


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6. ADTA on Community Mobilization and Development

43. The ADTA had an implementation period of 24 months with a target to organize 30community groups into financially viable and self-sustaining economic units. A leading NGO inSorsogon Province, the Social Action Center (SAC) was engaged to provide these services. SACtrained and fielded 14 social development workers, who organized 22 farmer groups and eight

fisherfolk groups, with an average of 20 members per group. The majority of the group membersreceived basic training on community development. Small-scale income-generating activities werealso organized among the group members. While the ADTAs quantitative targets were achieved,the quality and sustainability of the beneficiary groups were less satisfactory. A review conducted

jointly by SAC and the PMU in November 1990 (after 1.5 years of technical assistance [TA]implementation) found that over half the beneficiary groups were weak (Appendix 6). At the time ofthe OEM inspection, none of these groups was operating. Overall, the ADTA is rated less thansuccessful.

44. Several factors contributed to this problem. First, the delay in release of funds causedfinancial difficulties to SAC and delayed payments to social workers. Second, delays in setting upthe plant nurseries and artificial reefs caused confusion to the social workers who were organizing

the community groups to take care of these facilities. Third, the TA implementation period was tooshort. While the RRP correctly foresaw the need for social mobilization of the poor, the limited time(two years) for TA implementation restricted the success of community development, which was bynature a long-term process. Lastly, institutional support did not continue for the beneficiary groupsafter TA completion.

B. Economic Reevaluation

45. The OEM reestimated the EIRR for the entire Project and by project component, as shownin Appendix 7, which presents the results and the methodology used. The reestimated projectEIRR (5.2 percent) was substantially below the appraisal estimate (17.6 percent) and the PCRestimate (11.5 percent). A major cause of the sharp variance was overestimation for achievements

in the agriculture component, which accounted for 92 and 81 percent, respectively, of the Projectsincremental economic benefits in the EIRR calculation conducted at appraisal and PCR.15

46. The OEM found that the actual achievements in the agriculture component weresubstantially below the estimation made at appraisal and PCR. First, the abaca rehabilitationsubcomponent achieved 922 ha, 54 percent below the 2,000 ha used in the EIRR calculation inboth the appraisal and PCR.16 Second, the plant nurseries distributed 389,750 seedlings, 61percent below the target of 1 million. Third, CISs rehabilitated 2,049 ha, 25 percent below thetarget of 2,750 ha. Furthermore, the EIRR estimated at appraisal and PCR included incrementalbenefits from annual crops (mango, cassava, corn, mungbean, peanut, sweet potato, and uplandrice) with a total area of 3,157 ha, which were to be interplanted with perennial crops. Since theProject did not provide any support for the annual crops (neither seedlings nor extension services)

and the expected increase in the annual crops did not materialized, the EIRR that was reestimatedat PPAR excluded these crops.

47. The substantial amount of indirect and unquantifiable benefits generated by the roadcomponent, which greatly stimulated the local economy and led to upgraded classification levels ofeconomic development for most municipalities in Sorsogon Province (para. 22), is not captured by

15See Appraisal Report, Appendix 14, Table 6 and PCR, Appendix 9, page 1.

16While only 922 ha was rehabilitated at project completion, the PCR expected that the remaining targets would becompleted by 2002 (para. 38) and therefore used the expected 2,000 ha in its EIRR recalculation.


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the EIRR calculation. The road component accounted for 58 percent of the Projects base cost butcontributed only 7 percent of the Projects incremental benefits in the EIRR estimated at appraisal.In contrast, the agriculture component accounted for 26 percent of the Projects base cost butcontributed 92 percent of the Projects benefits.17 Consequently, the substantial reduction in theactual achievements of the agriculture component led to the sharply reduced project EIRR.

C. Sustainability

48. The Projects sustainability varied by component. According to the OEM, the roads, floodcontrol structured, and health facilities have been properly maintained by DPWH (responsible fornational secondary roads and flood control facilities), Provincial Engineers Office (provincialroads), and DOH (health facilities). These offices have regular budgets, competent staff(strengthened under the Project), and adequate equipment (provided by the Project). In particular,the impact of schistosomiasis control has been sustained and the prevalence rate has remained ata low level since project completion. The artificial reefs need only minimal maintenance and havebeen maintained well. The sustainability of the abaca laboratory and plant nurseries is at risk, asthese institutes bear the responsibility for distributing seedlings free of charge while receivinginsufficient funds for their operations (paras. 36-37). Their sustainability will be improved if they are

allowed to operate on a commercial basis, or if they are privatized. The level III water supplysystem is currently maintained by the Irosin municipal government, which has subsidized about40 percent of the systems O&M cost (para. 31). It seems that the subsidy is necessary in the shortrun as the beneficiaries are unable to finance the entire O&M costs, and the social costs of lettingthe water system deteriorate are high. In the long run, however, a solution needs to be developedwith the joint efforts of the municipal government, beneficiary groups, and private sector.

49. The sustainability of CIS is an urgent issue requiring immediate action. While 5 of the 14IAs have strong leadership and therefore active member participation and satisfactory O&M status,the rest of them are weak. In particular, four CISs have already shown deterioration due tounrepaired damage and poor maintenance.

50. The OEM discussed several of remedial measures with NIA staff, LGUs, and leaders andmembers of the IAs. As a first step to the long-term goal, an intensive information and educationcampaign should be launched to raise farmers awareness of their rights and responsibilities. Itshould be made clear to the irrigators that they are the owners of the CISs and that they should notrely on the government to take care of the systems for them. To ensure that they have sufficientfunds to repair the existing and future damage in a timely manner, a reserve fund needs to beestablished, which should be used exclusively for damage repair. This fund could be collected fromthe beneficiaries in financially good (or normal) years and used in a bad year. The water chargesfor routine O&M and the reserve fund together would likely add up to about 10 percent of theincremental rice yields, which is considered a reasonable burden to most beneficiaries. NIA couldprovide matching funds to the IAs to encourage the establishment of the reserve fund.

51. The IAs need to be substantially strengthened. Currently, payments to the leaders of theIAs are too low to obtain satisfactory services. The number of leaders in the IAs should be cutsubstantially, and the remaining leaders should receive an attractive financial package linked to theperformance of their services, including collecting user fees, conducting routine O&M of thesystems, and organizing damage repair. LGUs should play a key role in strengthening the IAs, byfacilitating the election of their leaders and providing sufficient extension services. Consideringboth the crucial role of extension workers in strengthening the IAs and most LGUs weak financialcapacity to employ enough extension workers, it may be necessary for LGUs to receive a portion

17See Appraisal Report, page 23 and Appendix 14, page 8.


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of the collected user fees to finance salaries for extension workers. This approach will providefinancial incentives for the LGUs to actively participate in strengthening the IAs and CISs. NIAshould continue to monitor CIS operations and provide technical support to the IAs.

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

A. Socioeconomic Impact

52. Appendix 8 summarizes the Projects socioeconomic impact by project component. Inparticular, beneficiaries highlighted the impact of the improved roads, which (i) linked the isolatedrural villages to the mainstream of economic development and opened job opportunities for localresidents; (ii) reduced travel time and enabled the selling of perishable products (such as fish andvegetables) to outside markets where prices were better; (iii) facilitated farm extension and socialworkers visits to remote villages; and (iv) improved local residents access to public services,including hospitals in cities.

53. The Project did not include a component specifically targeting women. Nevertheless, focusgroup discussions and household interviews with beneficiaries revealed the Projects positive

impacts on women. For example, the number of women-managed shops and women vendors(those who buy and sell fish, vegetables, or cooked-food items) increased along the improvedroads. The new bus stations helped women find employment (such as maids) in cities. It wasreported that some women assumed positions in IAs and fisherfolk associations, such asaccountants. They also received training under the Project.

54. The Projects impact on poverty was significant, as shown in Appendix 9, which providesthe poverty estimates made by the OEM together with a technical note on the methodology used.18The estimates show that rural poverty in the project area was reduced from about 70-80 percentbefore the Project to a current level of 60-65 percent on a cash income basis, or from 55-70percent to 40-60 percent including both cash and noncash income. This implies that about 15percent of the people had moved above the poverty line by the end of the Project. The OEM found

that a large amount of those who became nonpoor were tenants with access to land. It also foundthat the poors living conditions had improved by the end of the Project as the local economyimproved. Except for the poorest (the sick and elderly), most of the poor could afford three meals aday. No hunger or serious malnutrition was evident in the project area.

55. However, about 50-60 percent of people in the project area remained poor, most of themlandless and jobless laborers, including a large number of municipal fisherfolk who did not haveboats and worked as casual laborers with irregular incomes. Interviews with the poor revealed thatthey received proportionally fewer project benefits compared to the nonpoor. Primarily due to theirweak capacity, especially their lack of access to land, capital, and other assets, these poor were intoo weak a position to make use of the public facilities invested under the Project, such as roads,irrigation systems, and artificial reefs. The CISs benefited those who had access to irrigated

farmland, such as landlords, small landowners, and tenants with regular incomes. These were therelatively better-off groups in a typical poor village in Sorsogon Province; they accounted for about20 percent of the population, whereas the poor municipal fisherfolk accounted for about 60percent, and the upland poor, 15-20 percent. The landless poor might benefit indirectly from theCISs if the increased rice harvest required more labor. However, this impact was not really felt asthe rising population intensified competition among laborers looking for work. The artificial reefswere intended to benefit municipal fisherfolk. However, due to weak law enforcement, much of the

18Since there were no updated official data on poverty in Sorsogon Province, the OEM made a rough estimate of ruralpoverty in seven municipalities based on focus group discussions with project beneficiaries.


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increase in fisheries resources was captured by commercial operators (para. 40). Similarly, manyof the free seedlings distributed under the Project benefited the nonpoor (para. 36).

B. Environmental Impact

56. As envisaged at appraisal, the Project did not cause negative environmental problems as it

concentrated on rehabilitation of existing roads and irrigation systems and not new construction.Positive environmental impacts were generated by the control of schistosomiasis. The artificialreefs contributed to regenerating fisheries resources.

C. Impact on Institutions and Policy

57. The Projects institutional impact on LGUs was significant: PMU staff received substantialtraining and gained extensive experience in project management; the majority of them remained inpublic service after project completion.19 The capacity of the project staff in other EAs and LGUswas also strengthened substantially. Today, the Provincial Engineers Office is capable of not onlymaintaining existing roads, but also building new roads. Some municipalities (such as Juban) havealso gained the capacity to build roads.

58. The Projects impact on beneficiaries was less impressive. The Project organized 22 farmergroups and 8 fisherfolk groups, but none of them remained in place at the time of the OEM. TheProject provided substantial assistance to the 14 IAs, but only 5 of them remained strong. Theabove inputs could have had sustainable impacts if there had been follow-up institutional supportafter project completion. The substantial beneficiary training could have been more effective if ithad focused on practical learning instead of classroom lecturing.20

V. OVERALL ASSESSMENT

A. Relevance

59. By focusing on poverty reduction in a neglected region, the Project was highly relevant tothe development strategy of the Government and the operational strategy of ADB at the time ofappraisal. It was even more so at the time of the OEM as ADB has since made poverty reductionits overarching goal. The outputs of the road development, flood control, and CIS componentsachieved the Projects objective as they contributed to poverty reduction through improving ruralinfrastructure and promoting the local economy. The health services and water supply componentsdirectly improved the living conditions of the poor. However, the agriculture and fisheriescomponent was less relevant as the free seedlings provided by the abaca laboratory and plantnurseries contributed little to the Projects objective. The artificial reefs were intended to benefitthe poor but, due to weak law enforcement, benefited mainly the rich. As the agriculture andfisheries component accounted for only 5 percent of the Projects cost, the Project is still ratedrelevant.

19 PMU staff detailed to the Project went back to their original offices after project completion. The majority of contractualstaff were absorbed by provincial and municipal governments.

20For example, a competition among the IAs could have been organized with an award granted to the best IA thateffectively maintained their CIS. A study tour could have been organized to allow the IA leaders to visit the best CISand exchange working experiences. Similar competitions and awards could have been organized for the best fisheriesassociation, the best mayor, and the best village captain who contributed to effective control of illegal fishing.


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Assessment of Overall Project Performance

Criterion Assessment Rating (0-3) Weight (%) Weighted Rating

1. Relevance

2. Efficacy

3. Efficiency

4. Sustainability

5. Institutional Development

Relevant

Efficacious

Less Efficient

Likely

Moderate

2

2

1

2

2

20

25

20

20

15

0.40

0.50

0.20

0.40

0.30

Overall Rating Successful 100 1.80Assessment Ratings:Relevance: 3 = highly relevant; 2 = relevant; 1 = partly relevant; 0 = irrelevant.Efficacy: 3= highly efficacious; 2 = efficacious; 1 = less efficacious; 0 = inefficacious.Efficiency: 3 = highly efficient; 2 = efficient; 1 = less efficient; 0 = inefficient.Sustainability: 3 = most likely; 2 = likely; 1= less likely; 0 = unlikely.

Institutional Development and Other Impacts: 3 = substantial; 2 = moderate; 1 = little; 0 = negligible.

Overall Rating:HS = highly successful 2.5 < HS < 3.0S = successful 1.6 < S < 2.5LS = less than successful 0.6 < LS < 1.6US = unsuccessful < 0.6

G. Assessment of ADB and Borrower Performance

65. ADB designed the Project in accordance with its own and government strategies, in spite ofcertain weakness in the design of the agriculture component. ADB closely monitored projectimplementation; its review missions improved project implementation in the later stages andcontributed to project staff capacity building. The Government generally complied with the major loan

covenants. Most EA/PMU staff performed well in project management.Overall, the performance ofboth ADB and the Government was satisfactory.

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

A. Key Issues for the Future

1. Lack of Readiness in Project Implementation

66. The Project suffered serious delays in the first three years; such delays are common inADBs projects in the Philippines.21 One major cause was the lack of readiness of the projectoffices at the start of project implementation. The lack of financing before loan effectiveness

restricted the recruitment and training of project staff as well as preparation of workplans beforeproject implementation. It is encouraging that this issue has been brought to the attention of theGovernment, which recently introduced a project readiness filter to ensure that a project is readyfor implementation when it is approved. To facilitate the implementation of the new policy, theGovernment has included in its budget for 2001 the establishment of a project start-up facility withan initial fund of about P2 billion to finance the operation of project offices before loaneffectiveness. For other developing member countries, if a government is unable to finance the

21A special study on 41 evaluated projects in the Philippines reported that the average delay of these projects was nearlythree years.


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project offices before loan effectiveness, ADB should include in the financing package the fundingof the start-up phase for 6-8 months as part of the loan to provide sufficient time for staffrecruitment, training, and workplan preparation.22 The Projects experiences show that time spenton adequate preparation can be rewarded by smooth project implementation later.

2. Slow Flow of Project Funds

67. The slow release of project funds was the primary cause of most delays under the Project.The large number of signatures required for processing disbursement vouchers and insufficientstaff capacity in the agencies involved were two major causes. The design of future projects shouldinclude a critical review of the entire process of funds flow to screen out government agencies thatare not absolutely needed. If the major concern underlying an agencys demand for being involvedin the approval or release of funds is a desire to control or monitor, this should be addressed bydeveloping alternative measures without adding that agency into the funds flow process. If anagency is absolutely needed in the process, full-time staff should be assigned to that office tospeed up its paper processing. A monitoring mechanism should be established to identify andaddress the bottlenecks in the funds flow process in a timely manner.

3. Distribution of Project Benefits

68. The Project achieved its objective and reduced poverty by about 15 percent in the projectarea. Nevertheless, about 50-60 percent of the people in the project area remained poor. Theyreceived proportionally fewer project benefits as compared with the nonpoor, as the poor, due totheir weak capacity, were in too weak a position to make use of the physical infrastructure investedunder the Project. The Project intended to empower the poor through community developmentunder the ADTA. The impact of the TA, however, was limited by its small scale, shortimplementation period, and lack of continued institutional support. The Projects impact on povertyreduction could have been greater if it had included direct measures to tackle the key causes ofpoverty in Sorsogon Province, such as control of overfishing and illegal fishing, and incomegeneration activities among the landless and jobless laborers, who accounted for the majority of

the poor in the project area. Instead, the Projects agriculture component followed the tradition ofsupporting irrigation and production; its outputs (irrigation systems, free seedlings, and artificialreefs) benefited more the better-off groups that had access to land and other assets such as motorboats. To maximize the poverty impact of public investment, the design of future projects needs tobe guided by an analysis of the likely distribution of project benefits. ADBs mission leaders need tospend a substantial amount of time in the field interviewing the poor to fully understand the rootcauses of poverty and the key constraints that the poor are facing.23 Project components should bedesigned to remove those constraints. Social mobilization of the poor such as organizing them intogroups and training them on income generating activities should be conducted before the physicalinvestment is made to ensure that they will have the capacity to take advantage of the publicinvestment. ADTAs should be used for the provision of continued institutional support for the poorafter project completion.

22Currently, it is not feasible for ADB to finance project offices before loan effectiveness. Future review of ADBsoperational business processes may consider the possibility of providing retroactive financing for project offices.

23 In spite of the substantial amount of sector studies and the PPTA, the design of the agriculture component reflectedinsufficient understanding of the poverty issues in the project area. PPTAs cannot completely substitute the importantfieldwork that should be conducted by ADBs mission leaders. For poverty reduction projects, the current time provisionfor fieldwork may not be sufficient for mission leaders to fully understand the causes of poverty in a particular projectarea, since the fact-finding and appraisal missions typically last only two or three weeks each, and a large portion ofthat time is spent with government officials rather than beneficiaries.


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4. Farmers Lack of Willingness to Pay for O&M

69. The sustainability of the CISs is poor, primarily due to farmers lack of willingness to pay forO&M and the repair of damage. The weak leadership of the IAs and their lack of ownership of theCISs were the root causes of the problem. To ensure the sustainability of future irrigation projects,consultations with beneficiaries during the design stage need to be intensive. ADBs project

designers need to fully understand farmers various constraints and their real demand for theinvestment if it is not free. An intensive information and education campaign should be launched toraise farmers awareness of their rights, choices, and responsibilities. Policies relating to the repairof future damage should be spelled out clearly in written agreements to avoid unrealisticexpectations of continued financial assistance from the government. Investment should start onlyafter securing farmers willingness to pay in the form of written agreements. Realistic measuresneed to be developed to rule out those who do not want to pay. Agreements with farmers shouldspecify the amount of the water charges, which should be high enough to cover both routine O&Mand a reserve fund for the repair of future damages.

B. Lessons Identified

70. The approach to reduce poverty through improving infrastructure and promoting economicgrowth is effective when the majority of the population is poor. If many landless and joblesslaborers remain, who lack the capacity to take advantage of poverty reduction investment, then abottom-up approach focusing on social preparation of the poor, such as beneficiary grouporganizing, is needed to enhance the poors capacity to maximize a projects poverty reductionimpacts.

71. Social preparation requires long-term efforts and is better achieved by project componentsinstead of attached TAs. Continued institutional support for the poor is needed after projectcompletion and is better financed by ADTAs.

72. Demand analysis for irrigation projects should be based on farmers willingness to pay for

both routine O&M and future repairs. Their willingness should be secured through writtenagreements in conjunction with enforcement measures.

73. To minimize delays in project implementation, project design should either provide meansto finance the operation of the project offices before loan effectiveness, or schedule sufficient timefor the projects start-up phase. It is also necessary to minimize the number of agencies involved inthe approval and release of project funds, and increase the number of staff to speed up paperprocessing in the agencies that are absolutely needed in the flow of funds.

C. Follow-Up Actions

74. The provincial government and municipal LGUs concerned, with assistance from NIA,

should launch an information and education campaign to raise farmers awareness of their rightsand responsibilities, especially relating to the repair of future damage. A target date of May 2001 issuggested.

75. The LGUs should assist the IAs to set up a reserve fund. A target date of June 2001 issuggested.

76. AED should conduct policy dialogue with NIA and the provincial government on theimplementation and monitoring of the above actions. A target date of February 2001 is suggested.


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APPENDIXES

Number Title Page Cited on

(page, para.)

1 Project Cost Estimates 20 2, 52 Summary of Physical Achievements 21 3, 113 Changes in Classification of Municipalities in Sorsogon

Province23 6, 22

4 Status of Irrigators Associations 24 6, 245 Water Charges and Collection Rates 26 6, 24

6 Beneficiary Groups Organized under the ADTA 27 11, 437 Project Economic Analysis 28 11, 458 Socioeconomic Impact 46 13, 529 Rural Poverty in Sorsogon Province 48 13, 54


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Components

Foreign Local Total Foreign Local Total Foreign Local

A. Road Development 5,680 7,270 12,950 7,708 9,811 17,519 7,708 11,508

B. Irrigation and Flood Control 2,130 3,140 5,270 2,587 3,880 6,467 2,587 4,595

C. Health Services and Water Supply 630 600 1,230 774 805 1,579 774 805

D. Agricultural and Fisheries Support 335 815 1,150 438 1,072 1,510 438 1,072

E. Project Management and Training 380 1,540 1,920 437 1,748 2,185 437 1,748

F. Interest During Construction 750 0 750 659 0 659 659 0

G. Physical and Price Contingency 2,455 4,375 6,830 0 0 0 0 0 0

Totals 12,360 17,740 30,100 12,603 17,316 29,919 12,603 19,729

Sources: Report and Recommendation of the President, Project Completion Report, and Project Management Unit.

PCR

Table A1: Project Cost Estimates

($'000)

PPAR

PCR = project completion report; PPAR = project performance audit report.

Appraisal


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UnitItem/Component

Table A2: Summary of Physical Achievements (cont'd.)

Month/Year

of Completion

Targets

at Appraisal Actual

4. Agriculture and Fisheries

(a) Plant nurseries

(i) Provincial nursery rehabilitation no. 1 1 Dec-96

(ii) Communal nurseries no. 50 13 Jun-94(iii) Municipal nurseries no. 0 16 Jan-95

(iv) Planting material produced no. 1 million 413,780 1996

(v) Planting material distributed no. 1 million 389,750 1996

(vi) Nursery shed no. 2 2 Nov-91

(b) Abaca rehabilitation and extension support

(i) Abaca rehabilitation ha 2,000 922 Dec-96

(ii) Seedlings produced no. na 182,200 Dec-96

(iii) Seedlings distributed no. na 147,582 Dec-96

(iv) Tissue culture laboratory no. 1 1 May-92

(c) Artificial reefs module 3,000 2,445 Aug-96

5. Project management and training

(i) Office building no. 1 1 Aug-96(ii) Consulting services p-m 228 149

(iii) Office and training equipment lot 1 1 Aug-96

CIS = communal irrigation sytem; kg = kilogram; km = kilometer; na = not applicable; no. = number; p-m= person-month.

Source: Updated by OEM in May 2000.


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Appendix 3

Table A3: Changes in Classification of Municipalitiesin Sorsogon Province

Class Level

Municipality 1990 2000

BaconBarcelonaBulanBulusanCasiguranCastillaDonsolGubatIrosinJuban

MagallanesMatnogPilarPrieto DiazSta. MagdalenaSorsogon

5635555445

554663

4525544345

453551

Source: Sorsogon Provincial Planning and Development Office.


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Table A4: Status of Irrigators Associations

Name of CommunalIrrigation System (CIS) Status of Irrigators Associations (IAs) and CISs

Ariman-Botbot CIS,

Gubat

Strong IA leadership and active IA members.

Regular operation and maintenance (O&M) after every harvest. Irrigation canals and other infrastructure in good condition. Provision of incentives (raffle of gifts, free lunch, and snacks during general

meeting) to attract IA member participation. Water charge collection rate the highest among all 14 CISs (43 percent). O&M undertaken by hired labor financed by water charges.

Namuat CIS,Casiguran

No O&M for the CIS for the past two years due to a low rate of water chargecollection (2 percent for the past two years).

CIS dam threatened to collapse due to illegal quarrying (mining of stonesand sand near its base) by local quarrying firms for construction materials.

Only 15 percent of the IA members active due to weak IA leadership.

Adgao CIS,Sta. Magdalena

Irrigation canals and other infrastructure of the CIS in good condition. Regular O&M immediately after every harvest. About 80 percent of the members active.

Rangas CIS,Bacon

Upstream section of the CIS suffered from high siltation. The lowest rate (1 percent) of water charge collection. Irrigation canals in good condition since 60 percent of them had concrete

linings and were relatively new (completed at end November 1996). About 50 percent of the IA members active.

Calibag CIS,Matnog

Low rate (13 percent) of water charge collection. Upstream section of the CIS suffered from high siltation. The dam threatened to collapse as water from the river eroded the soil near

the dam (medium damage).

About 50 percent of the IA members active.

Gimagaan CIS,Donsol

Upstream section of the CIS was heavily silted. Low rate (14 percent) of water charge collection. About 50 percent of the IA members active.

Layog CIS,Barcelona

Water charge collection of 27 percent. Insufficient funds for regular O&M. One distribution canal near the river collapsed due to soil erosion, which

required a medium level repair. About 50 percent of members active.

Capuy-Ticol CIS,

Sorsogon

Very low (2 percent) water charge collection.

Upstream section of the CIS and distribution canals suffered from highsiltation.

Only 20 percent of the IA members active.

Alinao CIS, Sorsogon CIS had problems in water distribution due to depletion of water source. Very low (2 percent) water charge collection. Only 20 percent of the IA members active.

Buenavista CIS, Irosin About 85 percent of the IA members active. CIS in good condition. Relatively low water charge collection (15 percent), but IA members

contributed labor for O&M.


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Table A4: Status of Irrigators Associations

Name of CommunalIrrigation System (CIS) Status of Irrigators Associations (IAs) and CISs

Cawayan CIS, Juban Relatively low water charge collection (18 percent), but IA members

contributed labor for O&M. About 75 percent of the IA members active.

Cawayan CIS, Sorsogon IA members undertook efficient canal maintenance despite low water chargecollection (10 percent).

About 60 percent of IA members active.

Gulang-gulang CIS,Irosin

Poor O&M. Very low rate (2 percent) of water charge collection. Deterioration of CIS distribution canals. Only 30 percent of the IA members active.

Tagdon CIS, Barcelona IA faced problems in water distribution as the typhoon-damaged main canalhad not been repaired (required medium-level repair).

Very low rate (3 percent) of water charge collection. About 55 percent of the IA members active.

Source: OEM fieldwork, May 2000.


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Appendix 5

WATER CHARGES AND COLLECTION RATES

Table A5.1: Water Charges as Percentage of Incremental Rice Yield

Water Charges

(ha/crop)Name of CommunalIrrigation System (CIS)

Paddy(kg)

Value(P)

Actual PaddyYield(kg/ha/crop)

IncrementalPaddy Yield(kg/ha/crop)

Percentage ofWater Charges

in IncrementalPaddy Yield(%)

Adgao CIS, Sta. Magdalena 50 300 4,140 1,640 3.0Ariman-Botbot CIS, Gubat 90 540 4,320 1,820 5.0

Alinao CIS, Sorsogon 75 450 3,825 1,325 5.7

Buenavista CIS, Irosin 75 450 4,320 1,820 4.1

Capuy-Ticol CIS, Sorsogon 75 450 3,960 1,460 5.1

Cawayan CIS, Juban 75 450 4,275 1,775 4.2

Cawayan CIS, Sorsogon 75 450 4,275 1,775 4.2

Calibag CIS, Matnog 75 450 4,050 1,550 4.8

Gimagaan CIS, Donsol 75 450 3,825 1,325 5.7

Gulang-gulang CIS, Irosin 75 450 4,230 1,730 4.3

Layog CIS, Barcelona 50 300 4,275 1,775 2.8

Namuat CIS, Casiguran 75 450 3,825 1,325 5.7

Rangas, Bacon 75 450 4,050 1,550 4.8

Tagdon, Barcelona 75 450 4,275 1,775 4.2

Weighted Average 74 443 4,153 1,653 4.9

ha = hectare; kg = kilogram.Source: National Irrigation Administration-Provincial Irrigation Office, May 2000.

Table A5.2: Water Charge Collection as Percentage of Expected Collection

Name of Communal Expected Actual Collection (P) Collection Rate (%)Irrigation System (CIS) Collection (P) 1997 1998 1999 1997 1998 1999

Adgao CIS, Sta. Magdalena 84,000 9,401 7,853 11,245 11 9 13

Ariman Botbot CIS, Gubat 332,640 136,639 136,200 144,000 41 41 43

Alinao CIS, Sorsogon 172,800 11,736 2,895 2,650 7 2 2

Buenavista CIS, Irosin 205,200 8,138 22,275 30,647 4 11 15

Capuy-Ticol CIS, Sorsogon 156,600 16,123 9,120 3,878 10 6 2

Cawayan CIS, Juban 54,000 10,020 9,400 9,875 19 17 18

Cawayan CIS, Sorsogon 775,800 50,984 81,492 77,295 7 11 10

Calibag CIS, Matnog 78,300 6,250 5,975 10,000 8 8 13

Gimagaan CIS, Donsol 180,000 27,600 11,625 25,835 15 6 14

Gulang-gulang CIS, Irosin 234,000 15,402 12,438 5,369 7 5 2

Layog CIS, Barcelona 156,000 27,780 38,269 42,676 18 25 27

Namuat CIS, Casiguran 253,800 7,650 4,239 5,375 3 2 2

Rangas CIS, Bacon 234,000 41,181 10,046 3,000 18 4 1

Tagdon CIS, Barcelona 279,000 33,743 11,261 8,870 12 4 3

Total 3,196,140 402,646 363,086 380,715 13 11 12

Source: National Irrigation Administration-Provincial Irrigation Office, May 2000.


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Appendix 6

Table A6: Beneficiary Groups Organized under the ADTA(as of November 1990)

(A) Farmer Groups for Plant Nurseries (22 Groups)Performance Rating

Name of Association Location SAC PMU Ave.

OverallRating

Buhan Social Action Organization (BUSAO) Buhang, Bulusan 9 9 9 GoodSamahang Magsasaka ng Manlabong (SAMMA) Manlabong, PrietoDiaz

10 9 9.5 Good

Siuton Community Organization Social Action(SCOSA)

Siuton, Magallanes 9 9 9 Good

Samahang Magsasaka ng Gogon (SAMAGO) Gogon, Prieto Diaz 8 8 8 GoodSamahang Gagawa sa Ikauunlad ng Beguin(SAGIB)

Beguin, Bulan 8 8 8 Good

Bar Upland Farmers Association (BUFAS) Sisigon, Matnog 8 8 8 GoodSan Roque Small Farmers Association(SAROSFA)

San Roque, Sta.Magdalena

9 8 8.5 Good

Samahan sa Ikauunlad ng Polot (SIKAP) San Francisco,Bulan

9 8 8.5 Good

Magsasaka Para sa Ikauunlad ng Gimagaan(MAPAGSAKAAN)

Gimagaan, Donsol 8 8 8 Good

San Rafael Farmers Organization (SARAFO) San Rafael,Bulusan

8 7 7.5 Weak

Samahang Magsasaka ng Mayon (KAMAGMA) Mayon, Castilla 7 7 7 WeakSamahang Magsasaka ng Man-ao (SAMA-SAMA)

San Fernando,Prieto Diaz

7 7 7 Weak

Samahan ng Magsasaka sa Abas (SAMASA) Abas, Pilar 8 6 7 WeakDinapa Agricultural Unity DevelopmentOrganization (DAUDO)

Dinapa, Castilla 7 6 6.5 Weak

Samahang Magsasaka ng Banuang-Gurang(SAMBA)

Banuang-Gurang,Donsol

7 6 6.5 Weak

Samahang Binuklod ng Iisang Mithiin (SBM) Oras, Castilla 6 6 6 WeakSamahang Magbubukid ng Penafrancia (SMP) Penafrancia, Sta.

Magdalena6 6 6 Weak

Kilusang Magsasaka ng Pawa (KMP) Pawa, Matnog 8 5 6.5 WeakSamahang Magsasaka ng San Isidro (SAMASI) San Isidro, Sta.

Magdalena

6 6 6 Weak

Samahang Magsasaka ng Saguian Saguian, Donsol 4 4 4 WeakSamahang Magsasaka ng San Roque(SANSRO)

San Roque,Bulusan

6 2 4 Weak

Farmers Association Implementing True Unity inHidhid (FAITH)

Hidhid, Matnog 3 1 2 Weak

SAC = Social Action Center.Source: Project Management Unit.

(B) Fisherfolk Groups for Artificial Reef (8 Groups)Performance Rating

Name of Association Location SAC PMU Ave.

OverallRating

Kaboronyogan nin Saradit na Parasira canIlawod (KASAPI)

Ilawod (Zone II),Bulan

5 8 6.5 Weak

Patunayan Upang Lalong Umunlad (PULU) Biga, Magallanes,

Prieto Diaz

8 8 8 Good

Isang Samahan Laging Aasahan (ISLA) Behia, Magallanes 4 10 7 WeakSamahang Maliliit na Mangingisda sa Kaunlaran(SAMAMAKA)

San Antonio (Sapa),Pilar

8 8 8 Good

Tatabangan Makatabang sa Kaunlaran(TAMAKA)

Inapugan, Pilar 8 8 8 Good

Samahan ng Matiyagang Mangingisda ng Ogod Ogod, Donsol 4 1 2.5 WeakIsang Samahang Dapat Asahan (ISDA) Rawis, Donsol 8 6 7 WeakCoastal Area Fishermens Association (CAFADS) 5 7 6 WeakSAC = Social Action Center.Source: Project Management Unit.


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Appendix 7, page 1

PROJECT ECONOMIC ANALYSIS

A. Methodology and Assumptions

1. The methodology used in the Project economic analysis follows ADBs Guidelines for theEconomic Analysis of Projects. The economic internal rate of return (EIRR) is estimated for the

Project as whole and by project component (road rehabilitation and improvement, communalirrigation system [CIS] improvement, plant nursery establishment and improvement, abacaplantation rehabilitation, and artificial reef establishment). Major assumptions underlying theEIRR estimation are given below.

(i) The economic analysis covered a period of 25 years (1989-2014), wherein theinvestment period extended over 8 years (1989-1997). Economic benefits weremeasured for a period of 23 years (1991-2014), upon the completion of the firstCIS in 1991.

(ii) All calculations on project economic benefits and costs were expressed inconstant 2000 prices. Project investments were adjusted using the World Banks

January 2000 manufacturers unit value index for foreign exchange items. Localbenefits and costs were adjusted to reflect the 2000 prices using gross domesticproduct deflator. Details are given in Table A7.1.

(iii) Economic prices of internationally traded commodities such as rice and urea arederived from the World Banks January 2000 commodity prices and priceprojections. The calculations of farm gate economic prices are given in Table

A7.2.

(iv) The quantifiable benefits for the CISs, plant nurseries, and abaca rehabilitationare derived through farm budget analyses for crops that received direct supportfrom the Project. The calculated net returns for each crop (irrigated rice, black

pepper, citrus, coffee, pili nut, mango, and abaca) are presented in Table A7.3.The estimated crop areas, yields, and intensity are given in Table A7.4.

(v) All economic values were estimated using world price numeraire. A standardconversion factor of 0.86 was used to adjust locally traded commodities and thelocal cost components of the Project to economic costs and benefits. Theconversion factor for unskilled labor was 0.80.

(vi) Project investment costs used in the economic analysis include the actual costsof civil works construction of roads and CISs, project facilities, consultantservices, and training. The investment costs included in the economic analysisare exclusive of transfer payments such as duties and taxes.

B. Estimation of Project Benefits

2. Only direct economic benefits were included in estimating the EIRR. These were the netincremental economic benefits derived from a comparison between the with and withoutproject scenarios. Benefits were derived from incremental perennial crops, irrigated rice,fisheries production, abaca rehabilitation, plant nurseries, CISs, artificial reefs, and roaddevelopment under the Project.


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Appendix 7, page 2

1. Road Rehabilitation and Improvement

3. The benefits from road development were derived from normal and generated trafficthrough vehicle operating costs (VOC) savings, road operation and maintenance (O&M)savings, and incremental traffic, which was estimated at 50 percent of the savings in VOC androad O&M. Due to the limitation of EIRR methodology, the large amount of indirect economic

benefits stimulated in the local economy following road improvement was not captured in theEIRR calculation, in spite of the fact that these indirect benefits were the major factor thatmotivated policymakers investment decisions. As a result, the EIRR estimated for the roadcomponent is very low (2.0 percent, Table A7.5), as rural roads by nature do not have traffic asheavy as a major highway in an urban area, and the savings in VOC and road O&M alone arenot big enough to justify the large amount of investment on the roads.

2. Communal Irrigation System

4. Most of the benefits of the CIS component were generated from the expansion ofirrigated areas, which enabled the increase of cropping intensity and rice yields. The economicbenefits estimated at appraisal were based on the target of 2,750 hectares (ha) of irrigated area,

an anticipated increase of rice yields from 5 tons/year to 8.6 tons/year, and an intensifiedcropping index from 1.08 to 1.6. The EIRR reestimated at project performance audit report(PPAR) was based on the actual achievement of 2,049 ha of irrigated area, a reestimated riceyield of 8 tons/year, and a cropping index of 1.7. The PPAR reestimation also considered theneed to establish a reserve fund to finance the repair of future damage to the CIS structures dueto frequent typhoons in Sorsogon Province. Accordingly, an annual cost of P500,000 was addedto the O&M cost for the 14 CISs. In spite of the increased O&M costs, the CIS component has ahigh EIRR reestimated at 15.2 percent.

3. Plant Nurseries

5. At appraisal and project completion report (PCR), the estimation of incremental benefits

from the plant nurseries included the benefits of both perennial crops (abaca, black pepper,citrus, coffee, pili nut, and mango) and annual crops (cassava, corn, mungbean, peanut, sweetpotato, and upland rice), which were to be interplanted with the perennial crops. Theincremental benefits from perennial crops were derived from the 385,334 seedlings that weredistributed under the Project. Assuming a mortality rate of 20 percent and an estimation of 640seedlings per ha, these seedlings enabled the planting of 485 ha of perennial crops. Thereestimation also used a conservative assumption that only 80 percent of the planted cropswould reach full development. The annual crops were excluded from the benefit reestimationconducted at PPAR as the Project did not provide either seedlings or extension services for theproduction of these crops, and the expected increase of these crops was not observed.

4. Abaca Rehabilitation

6. The Project targeted to rehabilitate about 2,000 ha of abaca plantations andaccomplished 922 ha. The shortfall was mainly due to widespread bunchy top disease, whichhas wiped out about 40 percent of the abaca plantations in Sorsogon Province since 1992. Forthe same reason, the yield increase from 0.5 tons/year to 1.6 tons/year estimated at appraisalwas adjusted to an annual yield of 1.0 ton/year at PPAR. The EIRR for this component was verylow (3.2 percent, Table A7.5).


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Appendix 7, page 3

5. Artificial Reefs

7. It was estimated at appraisal that each artificial reef module would increase fisheriesbiomass by 66 kilograms within one year of establishment. The Project targeted 3,000 modulesbut deployed only 2,445 at project completion, mainly due to delays in project implementation.Based on the actual achievement, PPAR estimated an annual increase of fisheries at 161 tons,

16 percent below the appraisal estimation of 192 tons. The high EIRR (30.5 percent) of thiscomponent was mainly due to its low investment and maintenance costs.

C. Economic Internal Rate of Return for the Entire Project

1. Base Case

8. The results of the EIRR calculation by project component and for the entire Project arepresented in Table A7.5. The base case of project EIRR was estimated at 5.2 percent, whichwas substantially below the EIRR estimated at appraisal (17.6 percent) and PCR (11.5 percent).One major factor underlying the sharp variance was the reduced achievements in theagriculture component, which accounted for 92 percent and 81 percent of the annual

incremental economic benefits in the EIRR estimated at appraisal and PCR, respectively(Appraisal Report, Appendix 14, Table 6 and PCR, Appendix 9, page 1).

9. The shortfall of achievement in the agriculture component was due to (i) the less thanhalf achievement in abaca rehabilitation (922 ha vs. the target of 2000 ha) 1; (ii) the less than 40percent achievement in plant seedlings (389,750 vs. the target of 1,000,000); and (iii) the 25percent shortfall in the CIS achievement (2,049 ha vs. 2,750 ha anticipated at appraisal).Furthermore, the EIRR that was estimated at appraisal and PCR included the incrementalbenefits from annual crops, with a total area of 3,157 ha, which was excluded in thereestimation at PPAR as the Project did not provide any support for these crops (para 5).

2. Sensitivity Analysis

10. Sensitivity analysis was conducted at PPAR for the entire Project, which was based ontwo scenarios: a 10 percent decrease in total benefits (which is, however, unlikely) and a 10percent increase in O&M costs. Due to the diversity of the project components, it was difficult toconduct a sensitivity analysis for the entire Project against risks of individual factors (such ascrop yield increase or price changes). The results of the sensitivity analysis are given in Table

A7.5, which suggest that a 10 percent decrease in all benefits would reduce the project EIRRfrom 5.2 to 4.3 percent, while a 10 percent increase in O&M costs would reduce the projectEIRR to 5.1 percent. The project EIRR is less sensitive to increases in O&M costs becausethese costs were relatively small.

1 The target of 2,000 ha was used in the EIRR recalculation at PCR. In spite of the poor achievement at projectcompletion, the PCR expected that the target of 2,000 ha could be achieved by 2002.


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Appendix 7, page 4

Table A7.1: Project Investment Costs

A. Project Cost by Type of Currency (in current prices, $000)Appraisal Project Completion PPARType of

Currency Amount Amount Amount As % of total costsPPAR vs. Appraisal

(%)

Foreign 12,360 12,603 12,603 39 102

Local 17,740 17,316 19,729 61 111

Total 30,100 29,919 32,332 100 107

B. Project Cost by Component and Type of Currency (in current prices, $000a

Item 1989 1990 1991 1992 1993 1994 1995 1996 1997 Total

1. Road Improvement

Total Cost 0 224 1,313 3,868 4,503 2,245 729 2,688 430 16,000

a. Foreign Exchange 0 97 571 1,681 1,957 975 317 1,168 187 6,951

b. Local Currency 0 127 743 2,188 2,547 1,270 412 1,520 243 9,049

2. CIS Rehabilitation

Total Cost 2 109 123 487 399 592 929 536 0 3,178

a. Foreign Exchange 1 47 54 212 173 257 404 233 0 1,381

b. Local Currency 1 62 70 276 226 335 526 303 0 1,797

3. Plant Nurseries

Total Cost 0 0 30 0 0 24 24 272 0 350

a. Foreign Exchange 0 0 13 0 0 10 10 118 0 152

b. Local Currency 0 0 17 0 0 14 14 154 0 198

4. Abaca Rehabilitation

Total Cost 0 0 115 123 54 54 47 47 0 440

a. Foreign Exchange 0 0 50 53 23 23 21 21 0 191

b. Local Currency 0 0 65 70 30 30 27 27 0 249

5. Artificial Reef